Home' Island Sun : ISN 012216 Contents 18B ISLAND SUN - JANUARY 22, 2016
According to a recent Texas Tech University study, the
age for peak financial decision making is age 50. Finan-
cial decision making ability begins to decline by age 60
and is significantly impacted by age 80. Even more worrisome
is that the same studies indicated that people's perceptions of
their own abilities do not decline.
How should this information affect families when constructing
their financial and estate plans? Anecdotally, most of my retiree
clients who are into their seventies and eighties have not shared,
nor intend to share their financial and estate information with
their adult children. They may fail to do so because they fear sharing may result in
unreasonable expectations of gifts or inheritance, or simply because that generation
generally considers discussion of money and assets a taboo subject.
When retirees aren't willing to share personal information with those who are clos-
est to them, who's there to guard against scams? A 2015 New Jersey case is enlight-
ening. In Margaret Lucca v. Wells Fargo Bank, N.A. the bank was sued for failing to
report to adult protective services a customer's wire transfers of hundreds of thousands
of dollars to Jamaica that turned out to be an elder abuse scam.
In this case, Margaret, an elderly customer of Wells Fargo, sent numerous wire
transfers that turned out to be the result of a fraud, an elder abuse scheme. Bank per-
sonnel reported the transactions to an internal fraud department, but that department
failed to report the transactions to law enforcement agencies or to the county adult
The heirs of the defrauded customer sought to hold the bank responsible for having
failed to report these transactions under a New Jersey statute, which permits financial
institutions to report suspicious financial transactions. The court held that the statute
was enacted to protect financial institutions from claims that they violated a customer's
right of financial privacy if they chose to report such matters.
The statute, the court held, was permissive and protective of the financial institu-
tions, and did not mandate reporting, but rather protected an institution if it did report
an incident. Therefore, the financial institution could not be held liable to report under
that statute. While the holding in this case seems to be a logical if not obvious reading
of the statute, the implications of the case and matters discussed in the opinion may
have far greater import to the future of estate planning.
Margaret's estate plan may have been less than optimal. Instead of owning the
accounts outright in her name, had she instead used a funded revocable trust naming
Wells Fargo as a trustee (thus in a fiduciary capacity), the institution may well have
been liable as it would have been held to a higher standard of care as opposed to sim-
ply a custodian of her money.
More important than being liable, the institution would have likely been responsible
in that capacity and would have more closely monitored financial transactions as a
trustee. A trustee would notice a wire transfer of such amounts to Jamaica. Even if the
initial abuse was missed, it would have more likely been identified and responded to
Perhaps another step was warranted as well. As clients age, hiring a care manager
as an integral part of the planning process may serve to avert potential elder abuse.
Hiring a care manager isn't common today, but I believe will become more common
as baby boomers age and retire.
A care manager may have identified the vulnerability of the client and alerted an
institutional trustee, family member or others to take action. Care managers, unlike all
the other members who comprise a traditional estate planning team for elderly clients,
are mandated reporters. They must report suspected abuse. The same statute that
absolved Wells Fargo of liability mandates that care managers and certain other catego-
ries of persons must report suspected abuse.
Had Margaret's team of advisors recommended a care manager, perhaps the elder
abuse would not have arisen. There was no oversight or monitoring of the client's
financial activities. We can begin to think of CPAs as more than tax return preparers
for example. Had a CPA been involved to write up periodic reports the abuse may
also have been identified earlier and addressed.
Appropriate checks and balances are a key to safeguarding aging clients, but in the
past have not been viewed as being within the scope of traditional estate planning.
The Margaret Lucca case should not be viewed as merely a limitation on the liability
of financial institutions, but rather a call to use more robust and comprehensive plan-
ning that extends well beyond mere document preparation (e.g. a durable power of
attorney), tax planning and the steps that have traditionally been viewed as constituting
©2016 Craig R. Hersch. Learn more at www.sbshlaw.com.
And Estate Planning
by Craig R. Hersch, Florida Bar Board Certified
Wills, Trusts & Estates Attorney; CPA
Dreams of Island Living
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